Southwall Technologies to Expand Capacity for XIR Automotive Film by Entering Into a Manufacturing Joint Venture in Germany.

PALO ALTO, Calif.--(BUSINESS WIRE)--June 14, 1999--

Southwall Technologies Inc. (Nasdaq:SWTX) today announced it has entered into a joint venture in Europe to manufacture XIR(R) film for the automotive OEM glass industry.

The trend towards clear XIR(R) glass in vehicles exceeds the present manufacturing capabilities of Southwall's U.S. plants.

The joint venture, Southwall Europe GmbH, will be located in the town of Groessroehrsdorf, Germany, approximately 25 km from Dresden, the capital of the state of Saxony. Southwall's partner in the joint venture is Venture Management Partners GmbH ("VMP"), a Berlin firm with extensive experience in working with foreign companies in green field start-ups in Germany.

Southwall Technologies holds a 74.9% interest in the newly formed company and VMP holds 25.1%. Southwall will supply the joint venture with its proprietary technology for manufacturing XIR(R) films in a facility that will begin construction in June 1999. Additionally, the newly established joint venture has executed a contract with Von Ardenne Anlagentechnik GmbH, a Dresden-based supplier of vacuum web coating equipment, for the design and purchase of multiple systems over the next five years. Southwall Europe GmbH is scheduled to begin shipping product to its automotive glass customers in early 2000.

"This joint venture is an important milestone for Southwall in the manufacture and supply of XIR(R) automotive OEM film to the European markets," said Thomas G. Hood, president and chief executive officer. "The European demand for our XIR(R) film continues to outstrip capacity of our plant in Palo Alto, California, and the recently announced $30 million supply contract from Sekurit Saint Gobain (See Press Release of May 24, 1999) requires that we immediately bring up new capacity. By locating in Groessroehrsdorf we will continue to strengthen our European market by being closer to our customers and their markets. We expect to experience cost reduction benefits with new, state-of-the-art equipment, built and supported from our Dresden supplier. These benefits combined with reductions in duties and tariffs, along with doing transactions in Euros, will make Southwall a much more attractive supplier in this demanding European industry."

"The federal government of Germany and the state of Saxony along with the Industrial Investment Counsel, a government-based support group in Berlin, have made this expansion possible for Southwall by providing substantial administrative support, incentives, and grants to Southwall Europe GmbH," Mr. Hood stated.

Southwall Technologies Inc. designs and produces thin film coatings that selectively absorb, reflect or transmit certain types of electromagnetic radiation. Southwall products are sold into the architectural, automotive and electronics.

This press release may contain forward-looking statements as that term is defined in the Private Securities Reform Act of 1995, including, without limitation, statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future. All forward-looking statements included in the document are based on information available to the Company on the date hereof, and the Company assumes no obligation to update any such forward-looking statements. Further risks are detailed in the Company's filings with the Securities and Exchange Commission, including those set forth in the Company's most recent Form 10-K and Quarterly Reports on Form 10-Q.